Demand for an item is projected to be 100 units per month. The monthly holding cost is $2 per unit, and it costs an estimated $55 to process an order.
a. Determine tire EOQ.
b. If the vendor is whiling to offer the manager a discount of $10 per order for ordering in multiples of 50 units (e.g., 50, 100), would you advise tire manager to take advantage of the offer? If so, what order quantity would you recommend?
c. Alternatively, if the demand can wait at the cost of $5 per unit per month, what should the order quantity' and the amount short per order cycle be?